Aging Report:

An aging report is referred to a list of customers' accounts receivable amounts by age. The aging report is usually divided into columns that consist of 30-day increments. The accounts receivable aging report is a statement that records the number of debtors of the company and the amounts that they owe to the creditors. This report is constructed as an in-house statement and it is maintained by the accounts department of the creditor. It is an analysis of accounts receivables that is broken down into various categories by length of their time outstanding.

For example: You are a lawyer and have your own private practice. As you do service for your clients, you bill those clients for a certain dollar amount. Those bills to your clients are "accounts receivable" to your law practice (that means money owed to you).Well, some of these clients may not pay immediately upon receiving the bill from the lawyer. In fact, it may take months for the clients to pay the amount owed.

The Aging report is an important component to structure the operating budget of the company. The company needs to understand the payment patterns by the customers and match it with the needs of the revenue by the company. This analysis would enable the company to have funds in hand to meet the operating costs of the company. For example, if a company bills its clients on a 30-days basis, but most of the clients pay close to 45-days, then the company should take a smart move to secure payment terms to the vendors that reflects business reality.

The aging report also indicates the relation the company would have with the customer. If the aging report consistently shows that the customer has a problem in making prompt payment to the company, the financial position of the may be affected. The aging report is also used by the company officials for investigation purposes.

Questions

• What is an Aging report?
• What is the role of an aging report in a company?